Fundamental Overview

▪ Despite strengthening against most major currencies (i.e. EUR, JPY, AUD), the ringgit closed 0.22% lower against the greenback as the USD index (DXY) climbed to near the 100.0 threshold for the first time since May 2020. On top of that, the local note was also pressured by a spike in the 10-year US Treasury (UST) yield, which narrowed the MY-US yield spread to as low as 130 basis points (bps) (YTD spread average: 171 bps). The USD was mainly supported by a more hawkish FOMC minutes.

▪ The ringgit may continue to trade around the 4.21 to 4.23 level against the USD with a downside bias as the DXY is expected to hover around the 100.0 level for the rest of the week amid higher US inflation expectations. In addition, China’s stringent COVID- 19 measures, coupled with the worsening crisis in the Eastern Europe may stall the pace of domestic economic recovery, further pressuring the ringgit. However, the improvement in the local market sentiment may continue to buoy the ringgit.

Technical Analysis

▪ Based on the 5-day EMA technical indicator, MYR could strengthen marginally by 0.1% to 4.217 this week.

▪ Technical-wise, MYR may trend slightly higher against the USD, with the USDMYR’s immediate resistance awaits at (S1) 4.214. Nevertheless, the pair may continue to climb higher above the (R1) 4.225 level if demand for safe havens remain elevated.

Source: Kenanga Research - 11 Apr 2022